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President Donald Trump, in his first State of the Union, said, “One of my greatest priorities is to reduce the price of prescription drugs. In many other countries these drugs cost far less than what we pay in the United States, and it is very, very unfair.” He went on to state, “That is why I’ve directed my Administration to make fixing the injustice of high drug prices one of the top priorities of the year. And prices will come down substantially, watch.”

U.S consumers spend roughly three times as much on drugs as their European counterparts, and 90 percent more as a share of income. In total, U.S. consumers account for about 64 to 78 percent of total pharmaceutical profits worldwide, despite accounting for only 27 percent of global income. This is according to a recently released white paper authored by Schaeffer Center Director Dana Goldman and Director of Research Darius Lakdawalla. They analyzed the effects of these lower drug prices in European countries on U.S. drug prices and potential future cures.

Using a previously published economic-demographic microsimulation, Goldman and Lakdawalla estimate that if European prices were 20 percent higher, the resulting increased innovation would generate $10 trillion in welfare gains for Americans, and $7.5 trillion for Europeans over the next 50 years.